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‘CEOs will need to show that their businesses are contributors to society rather than drains on it’

A CEO now not only leads operations, they are the public face of the company, the conduit between the board, the workforce and all manner of wider stakeholders.

While the business pages have focused on the pay packets of the country’s top CEOs, what has gone unnoticed are the expanding responsibilities and remit that today’s leaders have. The successful CEO of tomorrow will need to be adept at maintaining a wide web of stakeholder relationships and balance their often conflicting priorities.

Today the leaders of the world’s largest companies are often household names whose opinion on issues well beyond the operation of their company can carry similar weight to political leaders.

Conversely, while the impact of a company on the society around it, and the expectation of that society on the company, has increased over time, the level of trust which the public has in business and business leaders has plummeted. Just 28 per cent of people in the UK say they trust business leaders, 12 per cent lower than during the same period last year and lower than the 37 per cent across the rest of the world.

If this is to be addressed, and it must be, the role of the CEO will have to continue to evolve. They will need to show that their businesses are contributors to society rather than drains on it.

The relationship CEOs and organisations have with shareholders has also evolved as the make-up of equity markets has changed. In the 1960s, roughly half of shares were held by individuals; this is now just 10 per cent. Furthermore, the average period for which shares are held has gone from six years in 1950 to less than six months today.

Coupled with reduced trading times and transactional costs, greater impact of media coverage, new technologies and increased market volatility, we have created a situation in the UK where CEOs are increasingly having to balance the short-term desires of shareholders against the long-term requirements of the company.

Employees too are becoming more demanding on their organisations and its leaders. Data has shown that the next generation of employees place company values and societal contribution above personal remuneration. As highlighted in research by Global Tolerance of respondents born between 1981 and 1996, 62 per cent wanted to work for an organisation that makes a positive impact, half preferred purposeful work to a high salary and 53 per cent would work harder if they were making a difference to others.

CEOs, therefore, have the task of ensuring their companies can appeal to this demographic of employees. Securing the best and brightest new recruits no longer means just paying the best, it requires companies to think beyond the bottom line and for executives to bear in mind the impact the company has on society.

Last but not least is the relationship the CEO will need to maintain with the board. Gone are the days when a non-executive director (NED) could turn up and turn off, expected only to sit through a PowerPoint and some cursory questions. NEDs are increasingly expected to bring something substantial to the table, and contribute to the shaping of strategy and problem solving. The CEO will need to ensure this is framed by the necessary separation between NEDs and day-to-day operations.

Captain of industry, company spokesperson, stakeholder mediator and ethical leader, today and tomorrow’s CEOs need to be multi-skilled, agile operators. With new challenges and opportunities arising at a rapid pace, not least in the context of Brexit, it could seem that the complexity of the task is too much for one person to handle.

This is why the relationship between the board and the CEO is evermore vital. CEOs need support from non-executives, but they can’t be in their pocket and it’s this balancing act that is at the heart of the conundrum facing those who dare to lead.

By Stephen Martin, director general of the Institute of Directors